COMPARE COST OF RAISING REPLACEMENTS VERUS PURCHASING
Many producers are now facing or have recently faced a decision on whether to sell all or part of their herd due to diminishing feed supplies, primarily pasture and hay, and corresponding increases in feed prices. If a producer has invested their time, effort, and money into the development of a cow herd with the genetics desired, the heifers typically will be the more advanced and valuable than the cows from a genetic standpoint.
What does a producer have invested in those animals? If individual farm records are not sufficient to determine that value, a spreadsheet developed by Dr. J. Ross Pruitt in the AgCenter’s Department of Agricultural Economics and Agribusiness can be used to provide an estimated value. It is available on the AgCenter’s webpage at: www.lsuagcenter.com/en/crops_livestock/livestock/beef_cattle/marketing_economics_business/ by clicking on the “Costs to Develop Replacements Heifers” link. The next page will provide a “XLS” link for the spreadsheet and a “PDF” link for instructions.
The total cost to grow a heifer to maturity was about $1,300, based on July, 2011 prices. If the prices and availability of hay are shifted from on-the-farm production to purchased hay at $165 per ton, the total cost will increase about $330 per heifer. While no other inputs were changed, the spreadsheet will allow you to make other changes that you feel are warranted on your operation.
While it is unknown what the replacement heifer market will be in the next year or so, most producers and economists feel it will increase compared to current prices. The real question is will the price increase more than the $330 per head price that it would take to maintain heifers already owned by the producer? Also, will the quality of any purchased replacements be the same as those currently owned? If any purchased heifers produce calves with lower weaning weights than currently expected, then the increased cost to keep raised heifers is offset to some extent. These are important questions that you need to consider as you make decisions now related to the future of your herd. Similar spreadsheets are also available on the AgCenter’s website that will provide cash flow estimates and projected budgets (Louisiana Cow/Calf Budget link)
Source: W. Allen Nipper, Ph.D., LSU AgCenter